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Vehicle Efficiency Incentive Program Design. A Presentation to the Rhode Island Greenhouse Gas Stakeholder Group Steve Bernow, Tellus Institute February 12, 2003. Elements of the VEI Program. Vehicles Covered by the Program
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Vehicle Efficiency Incentive Program Design A Presentation to the Rhode Island Greenhouse Gas Stakeholder Group Steve Bernow, Tellus Institute February 12, 2003
Elements of the VEI Program • Vehicles Covered by the Program The program will apply to all light duty vehicles, a category that encompasses passenger cars and light duty trucks (including SUVs, minivans and station wagons). The program will cover both conventional and alternative fueled vehicles.
Elements (cont’d) • Basis for the Program The program will be based on the federal (EPA) vehicle miles-per-gallon (mpg) combined highway/urban rating It will not be tied to the sales price of the vehicle. (For alternative fueled vehicles the mpg rating would be adjusted by the relative GHG content of the fuel to that of gasoline.)
Elements (cont’d) • Within or Across Class (Number of Tiers) The program would be a single-tier system, with no class differentiation.
Elements (cont’d) • Treatment of Commercial Vehicles The Program would include all commercial vehicles.
Elements (cont’d) • Structure of the Incentive Program The Working Group was divided on which of the following two structures would work best: a) A linear schedule around the zero point (the weighted average fuel economy of the fleet), reaching fee and rebate plateaus of $4000 10 mpg and 50 mpg. respectively. (This was supported by the Conservation Law Foundation, Brown University, and RI-Department of Environmental Management)
Zero point is at 22 mpg. About 8% of new vehicle fleet are at zero-point, i.e., are unaffected by feebate. Based on 2001 sales, under this schedule, fees would amount to about $32 million and rebates would amount to $17.3 million, leaving about $14.8 million for contingency funds. Approximately 0.1% of fleet on each side will either pay or receive the cap amount of $4000. The slope of the rebate curve is $143/mpg. The slope of the fee curve is $333/mpg. A linear schedule around a zero point of 22 mpg, reaching plateaus of $4000 at 10 mpg and 50 mpg.
Elements… Structure (Cont’d) A deadband around the zero point (the weighted average fuel economy of the fleet), with a linear schedule subsequently that reaches plateaus of $4000 at 10 mpg and 50 mpg. The deadband would exclude vehicles around the mean from being charged a fee or from receiving a rebate. The size of the deadband would decide how many vehicles are excluded from the system. A deadband of plus to minus one mpg around the current mean of 22 mpg was deemed reasonable as it excluded about one-third of vehicles purchased in 2001. (This was supported by University of Rhode Island, RI Energy Office, Statewide Planning, Sierra Club) * AAA abstained from the voting.
Zero point is at 22 mpg. Deadband covers about 30% of new vehicle fleet. Based on 2001 sales, under this schedule, fees would amount to about $26.2 million and rebates would amount to $13.9 million, leaving about $12.3 million for contingency funds. Approximately 0.1% of fleet on each side will either pay or receive the cap amount of $4000. The slope of the rebate curve is $148/mpg. The slope of the fee curve is $364/mpg. A linear schedule around a zero point of 22 mpg, reaching plateaus of $4000 at 10 mpg and 50 mpg.
Elements (cont’d) • Administration of the Program The feebate will be administered at the point of first registration of a new vehicle in Rhode Island, as close to the point of purchase as possible, and as simply as possible. Fees will be collected by the Division of Motor Vehicles and will accrue in a program fund at the Division of Taxation at the Department of Administration. An annual report to the legislature on the progress of the Feebate will be provided.
Elements (cont’d) • Revenue-Neutrality The program will be designed to be revenue-neutral, except for a provision for administrative costs, public education/outreach and contingencies. The scheme decided upon would allocate roughly 80% of the revenues for rebates and 20% for the other costs. This 20% could be revised downwards once the system is deemed to stable and there is less uncertainty about the size of the contingency fund required.
Elements (cont’d) • Legality of the Program Labeling requirements may need to be either eliminated or be made more general instead of referring to federal fuel economy ratings A schedule of fees/rebates for all vehicle models could be posted prominently at each dealership, not individual labels on each vehicle. An alternative formulation that does not depend on the federal fuel economy ratings might have a better chance of standing up to preemption challenges. Particular attention to the preamble in drafted legislation, to state clearly that the ultimate goal of the program is to reduce GHG emissions, to help protect public health and the environment for Rhode Islanders, and not regulate fuel economy per se.
Elements (cont’d) • Annual Updates The program will be updated periodically to ensure that it continues to be a successful program that helps meet the overall targets of the Rhode Island GHG Action Plan. These updates can take the following forms: a) Increase the zero point and plateau points each year based on average Rhode Island new vehicle registrations in prior year (through October 15, so there is time to calculate and implement). b) If needed to keep on track to meet the GHG Action Plan targets, the Administrator would change the slope of the feebate and the maximum feebate levels every two years. The maximum increase in the feebate during each such revision would be no more than 10%, unless the program administrator demonstrates that GHG reduction targets are not being met and an increase of more than 10% is called for.
Elements (cont’d) • PublicOutreach Public outreach should be performed at two levels: Before finalization of legislation, in the form of public educational workshops, training videos and pamphlets for legislators and stakeholder groups During program implementation, through mail-outs, television and radio advertising, and informational materials at motor vehicle dealerships and relevant state government offices.
Alternative Structures to Ensure 80% Disbursement of Fee Revenues to Rebates Two pairs of alternative structures follow (each pair is with and without the deadband) • All have a maximum fee of $4,000 at 10 mpg and below. • The first pair has a maximum rebate of $4,000 at 41 mpg and above • The second has a maximum rebate of $6,000 at 50 mpg and above
Zero point is at 22 mpg. About 8% of new vehicle fleet are at zero-point, i.e., are unaffected by feebate. Based on 2001 sales, under this schedule, fees would amount to about $32 million and rebates would amount to $25.4million, leaving about $6.7 million for contingency funds. The slope of the rebate curve is $211/mpg. The slope of the fee curve is $333/mpg. A linear schedule around a zero point of 22 mpg, reaching plateaus of $4,000 at 10 mpg and 41 mpg.
Zero point is at 22 mpg. Deadband covers about 30% of new vehicle fleet. Based on 2001 sales, under this schedule, fees would amount to about $26.2 million and rebates would amount to $20.7 million, leaving about $5.5 million for contingency funds. The slope of the rebate curve is $222/mpg. The slope of the fee curve is $364/mpg. A feebate around a deadband from 21 to 23 mpg, reaching plateaus of $4,000 at 10 mpg and 41 mpg.
Zero point is at 22 mpg. About 8% of new vehicle fleet are at zero-point, i.e., are unaffected by feebate. Based on 2001 sales, under this schedule, fees would amount to about $32 million and rebates would amount to $26 million, leaving about $6 million for contingency funds. The slope of the rebate curve is $214/mpg. The slope of the fee curve is $333/mpg. A linear schedule around a zero point of 22 mpg, reaching different plateaus at 10 mpg and 50 mpg to maintain a 20% surplus of fees over rebates.
Zero point is at 22 mpg. Deadband covers about 30% of new vehicle fleet. Based on 2001 sales, under this schedule, fees would amount to about $26.2 million and rebates would amount to $20.8 million, leaving about $5.4 million for contingency funds. The slope of the rebate curve is $222/mpg. The slope of the fee curve is $364/mpg. A feebate around a deadband from 21 to 23 mpg, reaching plateaus of $4,000 at 10 mpg and 41 mpg.
